Dubai real estate market conditions remain soft in Q1

Dubai’s hotel and retail sectors have continued to slow down in Q1 2017, while office spaces and residential performance have shown slight improvement, real estate advisory firm JLL said in a report Tuesday.

Rentals didn’t change significantly from the past year’s decline of 7.9 percent for villas and 2.9 percent for apartments, and neither did rent prices. This suggests that the residential sector is currently poised close to the bottom of its cycle, the report said.

The residential sector is still attractive among Indian investors, as official reports say that they invested a total of AED 12 billion ($3.3 billion) in Dubai real estate.

Dubai saw the completion of 2,600 residential units during Q1, where apartments comprised 60 percent of completions, while villas and town houses comprised 24 percent and 15 percent, respectively. Around 28,000 units are currently under construction and scheduled for delivery by year-end.

“The recovery of residential prices in Dubai is unlikely before late 2017 at the earliest,” the report said.

Meanwhile the shopping mall retail sector hasn’t seen new projects in Q1 of this year, which makes the GLA stand at 3.4 million square meters; yet the sector is expected to grow 20 percent by 2020, a slight improvement compared to 17 percent growth rate in the last three years.

“The slowdown in the rate of economic growth and the strength of the USD are the major drivers behind weakening retail sentiment” JLL said.

Office Space

As for offices, vacancy rates currently stand at 14 percent, underlining the continued strength of demand for high quality and smart buildings, JLL said.

More tenants are also looking to move to cheaper locations, therefore the outlook for the office sector remains muted.

“While we recognize that the MENA region is perhaps not directly at the forefront of revolutionizing the workplace, the young, dynamic, innovative nature of the region, especially Dubai, means its real estate markets are likely to implement and adjust to these changes rapidly over the next 20 years,” said Craig Plumb, head of research, MENA, JLL.

Hotels

Elsewhere, the hotels sector is expected to get a boost following Dubai’s recently relaxed regulations and requirements, which meet the emirate’s objective of attracting 20 million visitors by 2020.

During Q1, 1,100 keys were added to the hotel market, to 79,000 keys.

The 5-star hotel segment is expected to dominate the completion of new hospitality projects in Dubai during 2017, while 3-star hotels will still be lagging at 12 percent.

“This suggests that although Dubai is diversifying its product mix, it remains largely concentrated towards higher tier market offerings,” the report said.